NHPC – Subscribe for Long Term

August 7, 2009

NHPC is India’s largest hydro power company. NHPC has experience of developing and executing hydroelectric projects. The company has managed the development and implementation of 13 hydroelectric projects, including two through its subsidiary, NHDC. NHPC has 5,175MW of existing generation capacity and is likely to almost double this over the next 4-5 years. This is totally CLEAN and Green Energy which will help the company earn carbon credits some time later. In FY2009, the company derived Rs3,436.22 crore or 84.81% of its restated consolidated total income from the sale of energy to the state electricity boards (SEBs) and their successor entities, pursuant to long-term PPAs.

In FY2009, the company generated a total of 16,582.72 million units (MUs) of electricity and its cumulative capacity index was 93.61%, which is higher thanthe cumulative capacity index levels required under the Central Electricity Regulatory Commission (CERC) regulations. NHPC is par-excellencewith any other company in the world in executing Hydro Power projects.

Current IPO:Mix of Offer for sale by Government of India and Additional Capital raising by the company.

Valuations:The company has been profit making for over 8 years now. [Thats all the records we have]. NHPC reported an EPS of Rs 1.0 for March-09.At 1.9x FY10 P/B for 6-7% RoE and 30x FY10CL EPS (upper band) for its EPS growth (9% cagr over FY09-14) we believe the valuations are demanding; at Rs36/share

Recommendation:If you had subscribed to Powergrid Corporation – PGCIL and still HOLDING you will make good money in Long Term. PGCIL was offered at Rs 52 and your worth has already doubled with stock now quoting at Rs 110 levels. In the next 3 years as PGCIL’s earnings rise, it will pay in excess of 50% dividend which yields 10% RoI yearly. Stock appreciation is additional return 🙂

We feel NHPC offers long term value to the investors and we recommend SUBSCRIBING to the IPO. Retail portion of the issue will OVERSUBSCRIBE by 2 or 3 times. personally subscribing to the issue.